Although we did not outperform the market today (the only way you could have done that was all in and then some) we managed decent gains. Surprisingly some of our largest positions did not move much at all. Hess registered a decent 4.76% gain but Kellogg only went up 1.9% versus the S&P 4.33% gain. We recently picked up the cereal maker because we figured the way the middle class was shrinking , more and more people would be eating cereal for meals besides breakfast. All kidding aside, there’s some truth to that. Kellogg sports a 3.56% dividend yield. That’s more than the 2.44% yield of its corporate BBB+ bonds maturing in 2018. Kellogg is trading near a 52 week low and the CEO bought 10,000 shares November 8th. Well, Kellogg has some issues, mostly well-known by now as many analysts have downgraded it but that’s the good news. Any improvement in margins,sales, or for that matter just about anything should spike the stock nicely. Besides we like being defensive with secure dividend payers..
Another stock we own that moved less than the market was Apple. Apple only registered a 2.32% gain. It was heartening to see that the director Bob Iger, CEO of Disney bought a million dollars worth of the stock yesterday after he was named to the board. Do you think he would have bought it otherwise? He was one of the few insiders that stepped up yesterday while everyone was under their desks. The most puzzling movement was the flat performance of specialty reinsurer, Endurance Specialty. ENH is a way to buy a basket of investment grade corporate bonds at a deep discount to book. ENH is selling for $36.17 per share while book value for the third quarter was $51.63( this is real mark to market book value of bonds).
Of course we had some 6 & 8% movers in battered down more speculative grade holdings. We continue to believe though that blue chip multi national dividend paying stocks are the best category to be in. There is just way too many trillions in public and private retirement plans with certain return assumptions and they are not going to get in the bond market. For that matter the entire defined benefit system could have built in systemic risk as 8% per year may be impossible in a diversified basket of stocks and bonds with interest rates at these levels.